Note G. Reinsurance

The Company cedes insurance to reinsurers to limit its maximum loss, provide greater diversification of risk, minimize exposures on larger risks and to exit certain lines of business. The ceding of insurance does not discharge the primary liability of the Company. A credit exposure exists with respect to reinsurance ceded to the extent that any reinsurer is unable to meet its obligations. A collectibility exposure also exists to the extent that the reinsurer disputes the liabilities assumed under reinsurance agreements. Property and casualty reinsurance coverages are tailored to the specific risk characteristics of each product line and the Company's retained amount varies by type of coverage. Reinsurance contracts are purchased to protect specific lines of business such as property and workers' compensation. Corporate catastrophe reinsurance is also purchased for property and workers' compensation exposure. Currently, most reinsurance contracts are purchased on an excess of loss basis. The Company also utilizes facultative reinsurance in certain lines. In addition, the Company assumes reinsurance, primarily through Hardy and as a member of various reinsurance pools and associations.

The following table presents the amounts receivable from reinsurers.



December 31
(In millions)	2016			2015
Reinsurance receivables related to insurance reserves:
Ceded claim and claim adjustment expenses	$	4,094		$	4,087
Ceded future policy benefits	212			207
Reinsurance receivables related to paid losses	147			197
Reinsurance receivables	4,453			4,491
Allowance for uncollectible reinsurance	(37		)	(38		)
Reinsurance receivables, net of allowance for uncollectible reinsurance	$	4,416		$	4,453

The Company has established an allowance for uncollectible reinsurance receivables related to credit risk. The Company reviews the allowance quarterly and adjusts the allowance as necessary to reflect changes in estimates of uncollectible balances. The allowance may also be reduced by write-offs of reinsurance receivable balances.

The Company attempts to mitigate its credit risk related to reinsurance by entering into reinsurance arrangements with reinsurers that have credit ratings above certain levels and by obtaining collateral. On a limited basis, the Company may enter into reinsurance agreements with reinsurers that are not rated, primarily captive reinsurers. The primary methods of obtaining collateral are through reinsurance trusts, letters of credit and funds withheld balances. Such collateral was approximately $3.0 billion and $3.2 billion as of December 31, 2016 and 2015.

The Company's largest recoverables from a single reinsurer including ceded unearned premium reserves, as of December 31, 2016, were approximately $2,353 million from a subsidiary of Berkshire Hathaway Group, $350 million from the Gateway Rivers Insurance Company and $212 million from subsidiaries of Wilton Re. These amounts are substantially collateralized. The recoverable from the Berkshire Hathaway Group includes amounts related to third-party reinsurance for which NICO has assumed the credit risk under the terms of the Loss Portfolio Transfer as discussed in Note E to the Consolidated Financial Statements.

The effects of reinsurance on earned premiums and written premiums are presented in the following tables.



(In millions)	Direct		Assumed		Ceded		Net		Assumed/ Net %
2016 Earned Premiums
Property and casualty	$	10,400	$	258	$	4,270	$	6,388	4.0	%
Long term care	486		50		—		536		9.3	%
Total earned premiums	$	10,886	$	308	$	4,270	$	6,924	4.4	%

2015 Earned Premiums
Property and casualty	$	9,853	$	274	$	3,754	$	6,373	4.3	%
Long term care	498		50		—		548		9.1	%
Total earned premiums	$	10,351	$	324	$	3,754	$	6,921	4.7	%

2014 Earned Premiums
Property and casualty	$	9,452	$	277	$	3,073	$	6,656	4.2	%
Long term care	508		48		—		556		8.6	%
Total earned premiums	$	9,960	$	325	$	3,073	$	7,212	4.5	%



(In millions)	Direct		Assumed		Ceded		Net		Assumed/ Net %
2016 Written Premiums
Property and casualty	$	10,451	$	245	$	4,255	$	6,441	3.8	%
Long term care	495		52		—		547		9.5	%
Total written premiums	$	10,946	$	297	$	4,255	$	6,988	4.3	%

2015 Written Premiums
Property and casualty	$	9,852	$	270	$	3,702	$	6,420	4.2	%
Long term care	493		49		—		542		9.0	%
Total written premiums	$	10,345	$	319	$	3,702	$	6,962	4.6	%

2014 Written Premiums
Property and casualty	$	9,283	$	276	$	3,024	$	6,535	4.2	%
Long term care	504		49		—		553		8.9	%
Total written premiums	$	9,787	$	325	$	3,024	$	7,088	4.6	%

Included in the direct and ceded earned premiums for the years ended December 31, 2016, 2015 and 2014 are $3,865 million, $3,344 million and $2,643 million related to property business that is 100% reinsured under a significant third-party captive program. The third-party captives that participate in this program are affiliated with the non-insurance company policyholders, therefore this program provides a means for the policyholders to self-insure this property risk. The Company receives and retains a ceding commission.

Long term care premiums are from long duration contracts; property and casualty premiums are from short duration contracts.

Insurance claims and policyholders' benefits reported on the Consolidated Statements of Operations are net of reinsurance recoveries of $3,016 million, $2,601 million and $1,379 million for the years ended December 31, 2016, 2015 and 2014, including $2,621 million, $2,282 million and $1,458 million, respectively, related to the significant third-party captive program discussed above. Reinsurance recoveries in 2014 were unfavorably affected by the commutation of a workers’ compensation reinsurance pool.